ABCI
TM
ALABAMA BUSINESS CONFIDENCE INDEX
State Business Confidence Improves as
2016 Continues
Business confidence rose to 55.1 on the second quarter 2016
Alabama Business Confidence Index™ (ABCI) survey, conducted
by the Center for Business and Economic Research in UA’s
Culverhouse College of Commerce. The index rose 2.1 points
to mark the highest showing since the second quarter of 2015.
Panelists remain somewhat less optimistic than a year ago when
the ABCI registered 57.6.
Panelists continue to see expansion in the Alabama economy, but
are less optimistic about the national economy. Confidence in the
state economy rose to a quite confident 56.4, while the national
economy index remained near the neutral mark at a barely
positive 50.9.
Every industry indicator moved higher on the survey and all
continue to remain positive. The sales index again tops the list
at 59.8, while expectations for capital expenditures, hiring, and
profits all remain in easily positive territory.
Overall, firms in finance, construction, miscellaneous services,
and professional services are the most optimistic this quarter, all
posting index levels of 56.0 or more. Retailers, however, continue
to see the economic environment as a negative.
The largest four metro areas all posted positive readings as
confidence remains at least moderately high in all four major
metros. Confidence increased in all metro areas except Mobile,
with the biggest gain seen in Birmingham-Hoover. Montgomery
enjoys the highest confidence among the large metros with an
index of 57.3.
ABCITM
Volume 15, Second Quarter 2016
Outlook for Second Quarter 2016
Statewide
ABCI
Change from
Q1
ABCI
55.1
2.1
National Economy
50.9
1.6
Alabama Economy
56.4
1.8
Industry Sales
59.8
4.0
Industry Profits
56.3
5.7
Industry Hiring
54.5
1.5
Capital Expenditures
53.0
0.6
Index above 50 indicates positive outlook.
Index below 50 indicates negative outlook.
Business Environment Expectations
Q2 2016 compared to Q1 2016
Outlook for U.S. Economy Improves
The national economy index rose 2.1 points to 50.9, an increase
over the previous two quarters. Only 26 percent of the state’s
business executives expect U.S. economic growth to be lower
than last quarter and another 43 percent think growth will continue
at about the same pace. This most recent U.S. reading represents
a 5.6 point drop from only a year ago.
Panelists from Mobile are the most optimistic about the national
economy, while respondents from Huntsville are again the least
enthusiastic about the national scene.
Large businesses, those employing 100 or more, were the most
optimistic about the national picture, with a tepidly positive reading
of 51.6. Medium-sized businesses, those employing 20 to 99
employees, have the most pessimistic view of the national stage
with a mildly negative reading of 49.3.
100
90
80
National and Alabama Economy
70
Index
60
55.5
54.2
57.4
57.6
54.8
51.2
53.0
55.1
50
MuchBetter
0.0
0.0
Alabama
SomewhatBetter
31.0
40
RemaintheSame
30
20
SomewhatWorse
10
MuchWorse
0
Q3
Q4
2014
Q1
Q2
Q3
Q4
Q1
Q2
20152016
National
37.6
43.0
11.2
50.8
24.4
0.4
1.6
Percent of ABCI Respondents
ALABAMA BUSINESS CONFIDENCE INDEXTM
Slightly Stronger Growth Forecasted for
Alabama Economy
National and Alabama Economy
Expectations versus Prior Quarter
Business executives expect the state’s economy to continue its
expansion in the second quarter of 2016. At 56.4, the index is
up 1.8 points from last quarter, but down 2.0 points compared
to a year ago. Almost 38 percent of panelists expect stronger
economic growth this quarter and approximately 51 percent
expect the state’s economy to perform about the same as last
quarter.
The mixed, but mostly positive sentiment of ABCI panelists in a
broad range of industries supports the recent 2016 forecast from
the Center for Business and Economic Research. CBER expects
the state’s economic growth to slow down slightly from 2.4 percent
in 2015 to 2.3 percent this year. Employment growth is forecasted
to decelerate from around 1.2 percent in 2015 to 1.0 percent in
2016, while tax revenues are forecasted to rise 2.7 percent in
FY2016 compared to last year’s 3.3 percent increase.
Q2 2016 compared to Q1 2016
Sales
3.1
48.8
ModerateIncrease
32.9
NoChange
14.3
ModerateDecrease
Percent
0.8
StrongDecrease
0
10
20
30
40
50
60
Profits
1.9
StrongIncrease
55
50
United
States
40
35
Q3
Q4
Q1
2013
0
10
20
Q4
Q1
Q2
Q3
Q4
2015
Q1
Q2
2016
Profits may also rise during the second quarter. The index value of
56.3 represents a 5.7 point increase from its first quarter reading.
About 36 percent of panelists expect to maintain steady profits,
while 45 percent of respondents expect profit trends to be better
than last quarter and 20 percent forecast weaker profits for the
period.
Expectations versus Prior Quarter
65
Sales
Percent
1.6
StrongDecrease
Q3
2014
Sales and Profits
18.2
ModerateDecrease
Q2
Panelists Expect Accelerated Sales Growth
35.7
NoChange
50.9
45
42.6
ModerateIncrease
56.4
Alabama
The statewide sales index gained 4.0 points this quarter, rising
to a to a strongly positive 59.8 - the best showing of the four
industry indicators this quarter. About 52 percent of panelists see
sales improving, while 33 percent expect sales in their industry
to remain the same as last quarter’s levels. Only 15 percent of
the panel forecasts a decrease in sales for the second quarter.
Construction firms, along with finance, insurance, and real estate
businesses are the most confident of stronger sales, while firms
engaged in retail trade are the most pessimistic.
Industry Performance Expectations
StrongIncrease
60
30
40
50
60
59.8
60
55
Hiring
3.1
StrongIncrease
50
27.5
ModerateIncrease
55.0
NoChange
12.8
ModerateDecrease
0
10
20
30
40
50
28.7
51.9
14.3
Percent
3.1
StrongDecrease
0
10
20
Q1
Q2
Q3
2014
Q4
Q1
Q2
Q3
2015
Q4
Q1
Q2
2016
Metro Area Analysis and ABCI History
NoChange
ModerateDecrease
Q4
60
1.9
ModerateIncrease
Q3
2013
Capital Expenditures
StrongIncrease
45
40
Percent
1.6
StrongDecrease
56.3
Profits
30
40
50
60
The Center for Business and Economic Research prepares quarterly forecasts of business confidence for the
state and for the Birmingham-Hoover, Huntsville, Mobile,
and Montgomery metro areas. Detailed results by industry
are only included in the statewide ABCI analysis.
All current and historical ABCI newsletters can be found at
http://cber.cba.ua.edu/abci.
2 | Center for Business and Economic Research, Culverhouse College of Commerce, The University of Alabama
ALABAMA BUSINESS CONFIDENCE INDEXTM
Pace of Job Growth Expected to Continue
ABCI: Optimism Rebounds in Q2
The state’s business executives are signaling moderate job gains
this quarter. The hiring index rose 1.5 points to 54.5 with 55
percent of firms planning to maintain the current pace of hiring
and 31 percent expecting to increase hiring over last quarter’s
level. Only 14 percent of respondents expect to hire at a slower
pace.
68.7
70
65
60
55.1
55
Increased hiring among construction, finance, and miscellaneous
service firms account for many of the expected job gains. Only
retail trade, wholesale trade, and healthcare firms are forecasting
a fall-off in hiring. All metro areas are expected to experience
job growth, but gains in Huntsville and Montgomery employment
could be slightly better than those of the state’s other large metro
areas.
50
45
40
35
30
Modest Gains Forecast for Capital
Expenditures
31.5
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Capital spending growth will only slightly improve in the second
quarter of 2016. The index gained less than a point to 53.0.
Over half of panelists (52 percent) expect to maintain investment
at current levels, while over 30 percent anticipate increased
spending compared to last quarter.
The outlook for capital investment is the most positive
in healthcare, which scored a healthy 57.1. Firms in the
transportation, information, and utilities sector are also likely to
see the increased investment, while businesses in wholesale
trade are the least optimistic about capital spending.
Hiring and Capital Expenditures
Q1
Q1
Q1
Q1
Q1
Construction Confidence Remains High
Construction firms are the most optimistic this quarter, with an
ABCI reading of 58.6 based on strongly positive outlooks for
sales and hiring. Confidence is also strong among financial
services firms with the continued expectation of increased
sales contributing to an overall index of 58.2. Retail trade and
healthcare reported the lowest confidence with pessimistic
readings of 45.4 and 49.7, respectively. Decreased hiring and
profits can be expected for companies in both of these sectors.
ABCI by Industry
Expectations versus Prior Quarter
Q2 2016
Change from
Q1 2016
Construction
58.6
0.3
Manufacturing
53.7
-1.0
Transportation/Information/Utilities
53.5
0.3
Wholesale Trade
52.2
0.7
58
Hiring
56
Q1
200220032004200520062007200820092010201120122013201420152016
54.5
54
53.0
52
Capital Expeditures
50
Retail Trade
45.4
-3.3
48
Finance/Insurance/Real Estate
58.2
-1.1
46
Professional/Scientific/Technical Services
55.7
-1.0
44
Healthcare Services
49.7
-0.7
All Other Services
56.1
-0.8
Statewide
55.1
2.1
42
Q3
Q4
Q1
2013
Q2
Q3
Q4
2014
Q1
Q2
Q3
Q4
Q1
2015
Q2
2016
Industries In Depth, Second Quarter 2016
Construction
Manufac.
Transp./Info./
Utilities
Wholesale
Trade
Retail
Trade
Fin./Insur./
Real Estate
Prof./Sci./
Technical
Healthcare
All Other
Services
Sales
64.5
59.0
54.2
57.4
50.0
66.3
59.4
51.8
58.5
Profits
55.3
54.9
51.4
51.5
47.5
61.3
59.4
44.6
57.9
Hiring
60.5
52.8
51.4
48.5
45.0
57.1
54.4
48.2
57.3
Capital Spending
52.6
52.1
55.6
48.5
52.5
52.5
53.8
57.1
53.7
Component Index
Center for Business and Economic Research, Culverhouse College of Commerce, The University of Alabama | 3
ALABAMA BUSINESS CONFIDENCE INDEXTM
ABCI and Component Indexes, Second Quarter 2016, by Area
MSA
Statewide
BirminhamHoover
Huntsville
Mobile
Montgomery
National Economy
50.9
51.2
50
52.9
51.9
Alabama Economy
56.4
55.8
55.9
58.6
58.8
Industry Sales
59.8
57.3
59.4
60
62.5
Industry Profits
56.3
54.2
56.9
57.1
56.9
Industry Hiring
54.5
54.6
55.9
53.6
55.6
Capital Expenditures
53.0
52.7
52.8
49.3
58.1
ABCI
55.1
54.3
55.2
55.2
57.3
Confidence Increases in Most Metro Areas,
to at least Moderately Positive in All
Among the largest four metro areas, Montgomery business
leaders are the most confident about second quarter prospects,
enjoying a 1.6 point increase to a very confident 57.3 led by a very
confident outlook for sales and capital spending.
Mobile’s outlook remains confident at 55.2, despite a 2.1 point
drop from last quarter. Area indexes for sales and profits remain
very strong at 60.0 and 57.1, respectively. Capital spending
expectations fell 4.7 points, however, to a now negative 49.3.
Huntsville business sentiment rose 2.2 points to 55.2 lead by
strong expectations for sales and profits after a 5.4 point jump in
the latter’s index. Only the national economy is seen as potentially
troublesome, coming in at a neutral 50.0. All other measures were
easily positive.
ABCI Birmingham-Hoover gained 3.8 points to 54.3 buoyed by
positive readings in every category — especially in sales, which
gained 5.7 points to rise to 57.3. Birmingham-Hoover executives
remain confident about the prospects for the Alabama economy
with a second quarter reading of 55.8.
ABCI and Component Indexes by Firm Size,
Second Quarter 2016
Number of Employees
0 to 19
20 to 99
100+
National Economy
50.8
49.3
51.6
Alabama Economy
54.5
58.1
56.9
Industry Sales
62.6
62.2
55.5
Industry Profits
59.6
56.8
52.7
Industry Hiring
55.3
58.1
50.8
Capital Expenditures
53.4
55.7
50.5
ABCI
56.0
56.7
53.0
The Center for Business and Economic Research would
like to thank the 258 Alabama business executives who
completed the second quarter 2016 ABCI survey. This
report from the 58th consecutive quarter of the ABCI
survey would not be possible without your participation.
Be sure to log in during the June 1-15 survey window
to record your opinions about economic prospects and
industry performance looking ahead to the third quarter
of 2016.
Confidence Improves Broadly for Small and
Medium Sized Firms
Almost every indicator shows at least moderate optimism for
each of the three groups categorized by number of employees.
Small and medium sized businesses are more confident than last
quarter as they evaluate their second quarter 2016 prospects.
Alabama businesses employing between 20 and 99 have the
highest ABCI at 56.7, up 4.2 points compared to first quarter
2016. These medium -sized firms are the most optimistic about
sales, hiring, and the state economic environment, but are least
optimistic about the national economy as that index fell into
negative territory at 49.3.
The ABCI registered 56.0 among small firms - those with fewer
than 20 employees. These firms remain the most optimistic about
sales and profits, but are barely positive in their outlook for the
national economy.
For large firms, those with 100 or more employees, confidence
fell 1.2 points this quarter to a still positive 53.0. Nevertheless, all
indicators remain positive, particularly with regards to sales and
the state economy, which is strongly positive with a reading of
56.9.
Analysis provided by Gregg Bell. Ph.D., Socioeconomic Analyst, Center for Business and Economic Research,
Culverhouse College of Commerce, The University of Alabama.
For more details on the Alabama Business Confidence IndexTM, visit cber.cba.ua.edu/ABCI
For information on the Center for Business and Economic Research, visit cber.cba.ua.edu
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